Cyberlocker sites come under the radar of copyright holders

By Nick Solish

In the war of music pirates versus record labels, cyberlockers are heating up as the next battleground for copyright suits.  A cyberlocker is an online storage provider that allows users to upload and share files.  Other users can then access those uploaded files for free, simply by clicking a link to the site and a second link to download the file.

This recent battle started earlier this year when the Motion Picture Association of America (MPAA) sued Fort Lauderdale-based Hotfile.com.  Plaintiffs Disney Enterprises Inc., Twentieth Century Fox Film Corp., Universal City Studios Productions LLLP, Columbia Pictures Industries Inc., and Warner Brothers Entertainment Inc., all sued Hotfile Corp. and Hotfile’s owner, Anton Titov, in the Southern District of Florida alleging copyright infringement.

The suit alleges that “[d]efendants actively encourage their users to upload…infringing copies of the most popular entertainment content in the world.”  Further, plaintiffs argue that defendants openly pay users to upload, and disseminate links to, infringing content.  The complaint also claims that Hotfile uses a cash incentive program to encourage users to upload infringing content.

Since January 2011, cyberlocker sites have been drawing more traffic than BitTorrent sites, bringing to the attention of copyright holders.  Predictably, these sites often contain access to copyrighted files.  Hotfile itself has become one of the top 100 most trafficked sites on the Internet, making it a target for the MPAA.

Cyberlocker sites like Hotfile.com include disclaimers about compliance with the Digital Millennium Copyright Act as well as a process for filing take-down notices.  Cyberlocker services are not inherently illegal.  However, the plaintiffs allege that Hotfile’s use of a cash incentive program encourages people to upload infringing content to the site.

Hotfile may have initially been targeted because it had a track record of settling lawsuits against its service.  However, they recently changed tactics.  In April 2011, Hotfile filed a motion to dismiss the suit, which was followed by a ruling in July that dismissed the direct infringement claims against Hotfile.  The judge found thatplaintiffs had failed to plead the necessary facts proving that Hotfile engaged in the required volitional conduct for a direct infringement of copyright law.

However, University of Texas law professor Christopher Harrison speculates that the decision throwing out the direct infringement claim may not survive on appeal.  Harrison explains that Judge Adalberto Jordan’s reliance on Cartoon Network LP v. CSC Holdings Inc., 536 F.3d 121 (2d Cir. 2008) for the proposition that “a significant difference exists between making a request to a human employee, who then volitionally operates the copying system to make the copy, and issuing a command directly to a system, which automatically obeys commands and engages in no volitional conduct” may be misplaced.

Specifically, in Cartoon Network, defendant’s remote DVR system responded to commands from Cablevision subscribers and created a single, unique copy of a TV show for later viewing by that same subscriber.  In [Hotfile], not only are uploaded files available to anyone using the site, Hotfile’s servers automatically make five additional copies of uploaded files and five unique links for those files.  This seems to be a clear distinction. 

However, in a recent filing, Hotfile has shown that it may be willing to fight back.  Plaintiffs filed a motion to limit privilege logs that they are required to produce in the case.  Privilege logs describe documents or other items withheld from production in a civil suit under claims of attorney-client privilege, work product doctrine, or trade secrets.  The burden is on the withholding party to give the court and the opposing party enough information to test the privilege claim.

Hotfile opposed this motion, asking that the plaintiffs produce the standard, required privilege logs.  In their opposition motion, Hotfile’s lawyers stated in a footnote that “[b]eing able to determine which withheld documents are related to [p]laintiffs’ cooperative antipiracy efforts to remove material from Hotfile is also important for a counterclaim Hotfile intends to bring against at least one of the [p]laintiffs — Warner Bros. Entertainment, Inc..”  They allege that Warner has abused their anti-piracy tool by using it to remove content, which either was not infringing or for which Warner did not own the copyrights.

The MPAA complaint wasn’t the first major suit for Hotfile.  In January 2011, plaintiff Liberty Media filed suit against Hotfile and 1,000 John Does alleging that jointly and severally, with actual or constructive knowledge of or with willful blindness, reproduced and distributed certain Liberty-owned works through www.Hotfile.com.  Liberty demanded that the court freeze Hotfile’s assets held by PayPal and that the court seize Hotfile’s domain name in the meantime.

As of yet, Hotfile has not filed its counter-suit against Warner or any other copyright holders.  Should these cases be successful, they may ignite a storm of litigation against other cyberlockers that could virtually shut these services down or severely limit their inherently legal function.  The MPAA case against Hotfile will certainly be a strong indicator of what the future holds for other cyberlockers and whether they can survive legal scrutiny.

Nick Solish is a lawyer at Bryan Cave and recent graduate of the University of Texas. He can be contacted at nickolas.solish at bryancave.com.